The newly elected Labor government of Queensland last week allowed the expansion of the Abbot Point port that’s an integral part of Indian coal importer Adani’s AUS $16.5 billion Carmichael mine in the Galilee basin.

The go-ahead looks like good news for Adani, all the more so after the Labor party emphasised environmental impacts on the Great Barrier Reef as a major concern during the election campaign.

But there’s a downside: the new administration won’t provide any funding for the project. By contrast, the state’s former National Liberal government had promised to pay upfront for all the dredging and invest $100s of millions in the 500-mile railway linking the coal mine to the port.

And while the permit includes permission to excavate a channel through the Great Barrier Reef to Abbott Point, all the dredged material would have to be deposited on land, reducing damage to the marine environment but hugely increasing costs.

Now one of the major investors in Adani’s Carmichael mine – State Bank of India – is preparing to go back on a loan deal for US$1 billion initially agreed last year, according to sources speaking to Reuters. The bank is under pressure to reduce its bad debts.

The low coal price, lack of profitability of Queensland coal mines, and long timeline of the project were factors in the decision, the wire reports. And as a commodities analyst told the FT: “Right now with thermal coal at $60 a tonne and the Galilee coal 500-odd kilometres from port, funding these projects doesn’t seem viable.”

This follows a massive blow to the project last year when a host of US and European banks – including Deutsche Bank, HSBC, Royal Bank of Scotland and Barclays, as well as Citigroup, Morgan Stanley, Goldman Sachs – all refused to fund Adani’s plans to expand the port, which risks doing damage to the Great Barrier Reef.

The Adani mine, if it’s built, will be the largest thermal coal mine in Australia, producing 60 million tonnes a year over its proposed 60 year lifespan. The projects involve building ports and railroads, as well as the mines, adding up to tens of billions of dollars.

India and China clamp down on coal imports

India intends to reduce its dependence on coal imports, and its minister for power has openly admitted that it will be challenging to find a use for all of India’s domestic coal production – potentially contracting the market for Adani’s coal.

If India follows China’s lead in tackling air pollution from burning coal – which as reported by Greenpeace, is worse in Delhi than Beijing – this could be further limited.

Adani, which is India’s the biggest coal importer, has also scaled up its investment into renewables – possibly a symbolic move amid the political turning of the tide against imported coal.

A senior executive for the company says that the project may find alternative buyers in China and South Korea, with steelmakers Posco and electronics firm LG reportedly signing letters of intent to buy a total of $9 million of coal – while Chinese energy firms have earmarked another four million tonnes.

This unexpected news has raised questions from the Indian Stock Exchange. Adani’s announcement is surprising because seaborne thermal coal prices have been at an all time low in an oversupplied market, removing the need for companies to be signing off-take agreements with a greenfield project that is struggling to come to financial close.

Also, the Chinese government is currently significantly reducing its dependence on imported coal as part of its strategy to rid itself of heavy air pollution.

Apart from the five-year low price of coal, continued opposition by green groups add uncertainty to whether Adani will be able to get all the finance it needs.

Risk to the Great Barrier Reef

One of the main environmental concerns has been the dredging of the seabed and dumping of around 2 million cubic metres of material near the Great Barrier Reef as part of the expansion of the port overseen by Adani – which would directly affected the health of the coral reef.

The Australian government banned all dredge dumping in the Great Barrier Reef Marine Park in January amid worries that UNESCO’s World Heritage Committee may label the reef “in danger” this year – and the new rules agreed with the new Labor Queensland government mean material from dredging would now be dumped on land.

But the dredging to expand the coal port would still take place in Great Barrier Reef waters.

Another threat to the reef is the burning of the coal from the mines in the Galilee Basin. When burnt, the coal from the Carmichael project will add 128.4 million tonnes of carbon dioxide per year to the atmosphere, which will accelerate climate change and lead to increased ocean acidification. This is one of the greatest threats to the long term health of the global and national treasure.

The burning of the Galilee coal also does not fit into any energy scenario if we are to limit global warming to 2 degrees above pre-industrial levels – the internationally agreed threshold beyond which catastrophic consequences are expected.

The transportation of the coal on ships and trains is also likely increase urban and industrial pollution into the coastal environment and risks degrading its delicate ecosystem.

But if the Carmichael project is unable to secure financing and stalls, then the benefits will be huge – several other major coal projects planned for the 250,000 square mile Galilee Basin could also find themselves stranded with no way to get their coal to market – or as an Australian might put it, ‘up the creek without a paddle’.